Bank of England tells banks to curb bonuses

Mervyn King, governor of the Bank of England, has urged banks to curb bonuses in order to protect themselves and businesses from the eurozone debt crisis.

In the Financial Stability Report, published 1 December 2011, the Bank of England’s interim Financial Policy Committee (FPC) recommends that distributions – payments of dividends to shareholders and bonuses to staff – should be reduced.

The report stated: “Given the current threatening environment, the committee recommends that, if earnings are insufficient to build capital levels further, banks should limit distributions and give serious consideration to raising external capital in the coming months.”

King said: “If there’s a choice between distributing money or keeping it to bolster resilience, our recommendation to banks is to ensure that they retain it to bolster their capital resilience.

“No-one who looks at the current position could surely deny that it is extraordinarily serious and threatening.”